The largest venue of investment for any eCommerce business is inventory. The companies need to shell out huge chunks of money to order large order of supplies and then spend money to store and maintain them until they are sold. If the inventory costs is not controlled, there are high chances that the company will incur losses even if it manges to achieve soaring sales. Hence, controlling the inventory costs is a must for any business. Following are the three tips that will help you achieve optimum level of inventory at the lowest possible costs.
As storing and maintaining physical products costs money, storing high level of stock doesn’t make sense. So divide the inventory into three different categories: products that contribute to the profits, products that allows the company to reach break even point, and products that do not produce profits nor cover costs. To categorize the products, you can check your sales reports to see what sells and what doesn’t.
If you are a first-time eCommerce merchant, the chances are quite high that you will be excited to order all your supplies as soon as possible without going through adequate planning. Avoid such impulses because you are blocking your capital by ordering unnecessary products, and then you are incurring overheads to maintain those supplies. Before placing any orders with the suppliers, study the demand patter and then estimate how much will you need for the next quarter. If you are into selling seasonal products, consider the peak season as well as slack season of sale of those products. Stocking high level of inventory during slack season doesn’t make any business sense.
Before you place any order with the vendor, communicating is important to improve the overall efficiency of the process. It’s highly possible that what you see of the product on the website is quite different in the real life. So when the quantity of the order is huge, it’s smarter to first ask for sample and to place order only when the sample’s quality meets your expectations. Apart from the product, you should also inquire about the vendor’s shipping and return policy, specially if you are a dropshipper. It’s very important that your policies and your vendor’s policies go hand in hand for smooth inventory management.